Illinois Craft Brewers Fight To Protect Right To Distribute

In the past few years, the nation-wide trend of craft brewing has developed a following of aficionados as zealous, finicky and committed as its counterpart in the wine world -- if a little scruffier. The trend has led to an explosion in the number of breweries operating nationwide, up nearly 20 percent in the last five years alone, according to the Brewers Association.

The Chicago area is one of the hubs of the microbrew phenomenon, with bigger names like Goose Island, Half Acre and suburban Munster, Indiana's Three Floyds leading the way. Smaller brewpubs and craft brewers like Metropolitan Brewing, Finch's Beer Co. and Revolution Brewing also cater to lovers of the finely-honed hop.

But a recent federal court decision has thrown craft brewers into a tussle with beer distributors and massive conglomerates, in a battle that will play out in the state legislature this month.

The dispute began when Anheuser-Busch, now a subsidiary of the Belgian mega-corporation InBev, made a rather audacious business move. The company, like all beer makers, is forced to deal with a middleman: the distributor. After Prohibition, the United States set up a three-tiered system for distributing alcohol, where the producer sells to a distributor, who in turn sells to the retailer. Only the retailer has direct access to customers.

Like any good business, Anheuser-Busch wanted to cut the middleman out. It already owned 30 percent of City Beverage, a Chicago wholesale distributor, and made a play to buy the remaining 70 percent. But the Illinois Liquor Control Commission pointed out that this would violate the three-tier system, and wouldn't allow the deal to go through.

Here, InBev cried foul. Specifically, it pointed to the fact that in-state beer producers (like the craft brewers mentioned above) were allowed to get distribution licenses, circumventing the distribution requirement, and it argued that out-of-state producers were being discriminated against by not being afforded this right.

Judge Robert Dow, Jr. agreed with Anheuser. But what to do? In his opinion, he saw two options: "extension" (allowing out-of-state brewers to distribute as well) or "nullification" (forbidding all brewers from distributing).

Nullification would be a cruel blow to craft breweries, who would then have to pay a third party to distribute their beers, a burden some of the smaller brewers might not be able to support. Judge Dow ultimately decided on nullification, but he gave an out: "the Court temporarily stays enforcement of its ruling to provide the General Assembly an opportunity to act definitively on this matter if it chooses to do so."

In other words, the state legislature has the chance to step in.

A team of local beer aficionados called, appropriately, Guys Drinking Beer, is one of the groups lobbying Springfield to adopt a middle path, allowing the little guys to self-distribute while keeping the three-tier system in place for behemoths like InBev.

The legislation they back would allow any brewer that produces fewer than 60,000 barrels of beer a year to obtain a distributor's license. Brewpubs would also be able to distribute under the legislation.

This would exclude even some of the larger craft brewers -- Goose Island, for instance, produced 127,000 barrels last year. But it would protect the smaller breweries who would potentially be crippled by a requirement to use a third-party distributor. For example, Chicago's Argus Brewery could keep self-distributing, and Two Brothers out of Warrenville could continue to run Windy City Distribution, which brings fine craft beers like Stone to retailers around Chicago.

"See, we got to thinking - the Illinois Craft Brewers Guild, who wrote the current legislation before the Illinois House and Illinois Senate, has the backs of craft brewers in the state," the Guys write on their "Save the Craft" page. "And we know that the Associated Beer Distributors of Illinois are in the corner of distributors. And Anheuser-Busch has suits in their corner too. But what about the people who drink all that beer in the first place? We're the ones who will ultimately be impacted by whatever proposal the legislature approves."

In order to save the craft, the site directs readers to call and email their legislators, encouraging them to back House Bill 205 and Senate Bill 88, the legislation that provides for this middle way.